exv10w5



 





Exhibit 10.5




EMPLOYMENT AGREEMENT




DATED AS OF July 1, 2003




BY AND BETWEEN




TEKNIK DIGITAL ARTS, INC.




AND




COREY COMSTOCK




 









 








EMPLOYMENT AGREEMENT




     This EMPLOYMENT AGREEMENT (“Agreement”) made and entered into as of July
1, 2003, by and between Teknik Digital Arts, inc.., a newly formed Nevada
corporation (the “Company”), and Corey Comstock, an individual citizen of the
State of California and resident of Orange County. (“Executive”).



RECITALS




WHEREAS, The Company wishes to employ Executive and Executive wishes to be
employed by the Company on the terms and conditions set forth herein, based on
their full and complete understanding of the legal and practical significance
of each of the provisions of this Agreement.



DUTIES AND TERM




     1.1 Employment. In consideration of their mutual covenants and other good
and valuable consideration, the receipt, adequacy and sufficiency of which is
hereby acknowledged, the Company agrees to employ Executive, and Executive
agrees to be employed by the Company, upon the terms and conditions herein
provided.



     1.2 Position and Responsibilities.



          (a) Executive shall serve as Art/Animation Director of the Company (or in
a capacity and with a title of at least substantially equivalent quality)
reporting directly to the President of the Company Executive agrees to perform
services not inconsistent with his position and involving duties of comparable
scope, dignity and importance to those of his position as of the date of this
Agreement, as shall from time to time be assigned to him by the President.



          (b) During the period of his employment hereunder, Executive shall devote
substantially all of his business time, attention, skill and efforts to the
faithful performance of his duties hereunder.



     1.3 Term. The term of the Executive’s employment under this Agreement
shall commence on July 1, 2003 and end on December 31, 2005 (Initial Employment
Period), unless terminated earlier strictly in accordance with Article III of
this Agreement. At the end of the Initial Employment Period, the term of the
Executive’s employment with the Company shall automatically renew from
year-to-year, unless otherwise terminated pursuant to the terms of this
Agreement.



ARTICLE II




COMPENSATION




     For all services rendered by Executive in any capacity during his
employment under this Agreement, including, without limitation, services as an
officer, director or member of any



 









 





committee of the Company or of any subsidiary or affiliate of the Company,
the Company shall compensate Executive as follows:



     2.1 Base Salary. The Company shall initially pay to Executive an annual
base salary of not less than $8,333 per month (the “Base Salary”) during the
term hereof; provided, however, that in the event the Company institutes a
salary reduction program which affects all Senior Executives by the same
percentage, then Executive’s Base Salary may be reduced by such percentage (and
the term “Base Salary” as used in this Agreement shall refer to Base Salary as
so adjusted). Executive’s Base Salary shall be paid in equal semi-monthly
installments. The Base Salary shall be reviewed annually by the board of
directors of the Company (the “Board”), or a committee designated by the Board,
and the Board or such committee may, in its discretion, increase the Base
Salary.



     2.3 Stock. Executive shall receive 100,000 shares of the Company’s common
stock as additional consideration of employment.



     2.4 Stock Options Executive shall be entitled to an option to purchase
50,000 shares of the Company’s common stock upon completion of the first six(6)
months of employment and 50,000 shares of the Company’s common stock for each
full year of employment thereafter, for up to two (2) years or 150,000 shares
maximum. The option price shall be $1.00 per share and the option to purchase
shall end three years after date of issuance.



     2.5 Annual Bonus. Executive shall be entitled to be considered for an
annual bonus as determined by the Board.



     2.6 Additional Benefits. Executive shall be entitled to participate in
all employee benefit and welfare programs, plans and arrangements (including,
without limitation, pension, profit-sharing, supplemental pension and other
retirement plans, insurance, hospitalization, medical and disability benefits,
travel or accident insurance plans), which are from time to time available to
the Company’s executive personnel; provided, however, that there shall be no
duplication of termination or severance benefits, and to the extent that such
benefits are specifically provided to Executive under other provisions of this
Agreement, the benefits available under the foregoing plans and programs shall
be reduced by any benefit amounts paid under such provisions. Executive shall
during the term of his employment hereunder continue to be provided with
benefits at a level which shall in no event be less in any material respect
than the benefits available to Executive as of the date immediately preceding
the date of this Agreement. Notwithstanding the foregoing, the Company may
terminate or reduce benefits under any benefit plans and programs to the extent
such reductions apply uniformly to all Senior Executives entitled to
participate therein, and Executive’s benefits shall be reduced or terminated
accordingly. Executive’s benefits shall include the following:



          (a) Relocation Expenses. In the event Executive’s principal place of
employment is relocated by mutual consent of the parties outside Orange County,
California, the Company shall reimburse Executive for all usual relocation
expenses incurred by Executive and his household in moving to the new location,
including, without limitation, moving expenses and rental payments for
temporary living quarters in the area of relocation for a period not to exceed
six months.



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          (b) Reimbursement of Business Expenses. The Company shall, in accordance
with standard Company policies, pay, or reimburse Executive for, all reasonable
travel and other expenses incurred by Executive in performing his obligations
under this Agreement.



          (c) Vacations. Executive shall be entitled to 10 business days, excluding
Company holidays, of paid vacation during the term hereof. Executive may not
accrue or carry forward unused vacation days.



ARTICLE III




TERMINATION OF EMPLOYMENT




     3.1 Death or Retirement of Executive. This Agreement shall automatically
terminate upon death or Retirement (as defined in Section 6.1) of Executive.



     3.2 By Executive. Executive shall be entitled to terminate this Agreement
by giving Notice of Termination (as defined in Section 6.1) to the Company:



          (a) for Good Reason (as defined in Section 6.1); and



          (b) at any time without Good Reason.



     3.3 By Company. The Company shall be entitled to terminate this Agreement
by giving Notice of Termination to Executive:



          (a) in the event of Executive’s Total Disability (as defined in Section
6.1);



          (b) for Cause (as defined in Section 6.1); and



ARTICLE IV




COMPENSATION UPON TERMINATION OF EMPLOYMENT




     If Executive’s employment hereunder is terminated, in addition to any
other rights or benefits specifically provided for herein, the Company shall be
obligated to provide compensation and benefits to Executive, as follows:



     4.1 In General. Except as otherwise provided in Section 4.2, if
Executive’s employment is terminated for any reason, the Company shall:



          (a) pay Executive (or his estate or beneficiaries) any Base Salary which
has accrued but not been paid as of the termination date (the “Accrued Base
Salary”);



          (b) pay Executive (or his estate or beneficiaries) for unused vacation
days accrued as of the termination date in an amount equal to his Base Salary
multiplied by a fraction the numerator of which is the number of accrued unused
vacation days and the denominator of which is 360 (the “Accrued Vacation
Payment”);



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          (c) reimburse Executive (or his estate or beneficiaries) for expenses
incurred by him prior to the date of termination which are subject to
reimbursement pursuant to this Agreement (the “Accrued Reimbursable Expenses”);
and



          (d) provide to Executive (or his estate or beneficiaries) any accrued and
vested benefits required to be provided by the terms of any Company-sponsored
benefit plans or programs (the “Accrued Benefits”), together with any benefits
required to be paid or provided in the event of Executive’s death or Total
Disability under applicable law.



ARTICLE V




RESTRICTIVE COVENANTS




     5.1 Confidentiality.



Concurrently with the execution hereof, Executive and Company shall execute and
Employee Invention and Proprietary Information Agreement in the form of Exhibit
B attached hereto. Executive hereby agrees to abide by the terms of the
Employee Invention and Proprietary Information Agreement during and to the
extent provided herein, after the termination of the Agreement.



          (a) Executive covenants and agrees to hold in strictest confidence, and
not disclose to any person without the express written consent of the Company,
any and all of the Company’s Proprietary Information, except as such disclosure
may be required in connection with his employment hereunder. This covenant and
agreement shall survive this Agreement and continue to be binding upon
Executive after the expiration or termination of this Agreement, whether by
passage of time or otherwise, so long as such information and data shall remain
proprietary information.



          (b) Upon termination of this Agreement for any reason, Executive shall
immediately turn over to the Company any “Proprietary Information,” as defined
in subparagraph (c) below. Executive shall have no right to retain any copies
of any material qualifying as Proprietary Information for any reason whatsoever
after termination of his employment hereunder without the express written
consent of the Company.



          (c) For purposes of this Agreement, “Proprietary Information” means and
includes the following: the identity of clients or customers or potential
clients or customer of the Company or its affiliates; any written, typed or
printed lists, or other materials identifying the clients or customers of the
Company or its affiliates; any financial or other information supplied by
clients or customers of the Company or its affiliates; any and all data or
information involving the Company, its affiliates, programs, methods, or
contacts employed by the Company or its affiliates in the conduct of their
business; any lists, documents, manuals, records, forms, or other material used
by the Company or its affiliates in the conduct of their business; and any
other secret or confidential information concerning the Company’s or its
affiliates’ business or affairs. The terms “list,” “document” or other
equivalents, as used in this subparagraph (c), are not limited to a physical
writing or compilation but also include any and all information whatsoever
regarding the subject matter of the “list” or “document,” whether or not such
compilation has



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been reduced to writing. “Proprietary Information” shall not include any
information which: (i) is or becomes publicly available through no act or
failure of Executive; (ii) was or is rightfully learned by Executive from a
source other than the Company before being received from the Company; or (iii)
becomes independently available to Executive as a matter of right from a third
party. If only a portion of the Proprietary Information is or becomes publicly
available, then only that portion shall not be Proprietary Information
hereunder.



ARTICLE VI




MISCELLANEOUS




     6.1 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:



          (a) “Accrued Base Salary” — as defined in Section 4.1(a).



          (b) “Accrued Benefits” — as defined in Section 4.1(d).



          (c) “Accrued Reimbursable Expenses” — as defined in Section 4.1(c).



          (d) “Accrued Vacation Payment” — as defined in Section 4.1(b).



          (e) “Base Salary” — as defined in Section 2.1.



          (f) “Cause” shall mean the occurrence of any of the following:



               (i) Executive’s gross and willful misconduct which is injurious to the
Company;



               (ii) Executive has engaged in fraudulent conduct with respect to the
Company’s business or in conduct of a criminal nature that may have an adverse
impact on the Company’s standing and reputation;



               (iii) the continued and unjustified failure or refusal by Executive to
perform the duties required of him by this Agreement which failure or refusal
shall not be cured within fifteen (15) days following (A) receipt by Executive
of written notice from the Manager specifying the factors or events
constituting such failure or refusal, and (B) a reasonable opportunity for
Executive to correct such deficiencies;



               (iv) Executive’s use of drugs and/or alcohol in violation of then current
Company policy or Executive’s failure to comply with other Company policies in
effect from time to time including, without limitation, policies relating to
sexual harassment; or



               (v) Executive’s breach of his duties under Section 1.2(b) hereof which
shall not be cured within fifteen (15) days after written notice thereof to
Executive.



               (g) “Code” shall mean the Internal Revenue Code of 1986, as amended.



               (h) “Continued Benefits” — as defined in Section 4.3(g).



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               (i) “Good Reason” shall mean the occurrence of any of the following:



                    (i) Without Executive’s express written consent, a material reduction by
the Company in Executive’s function, duties or responsibilities (including
reporting responsibilities) relative to Executive’s function, duties or
responsibilities in effect immediately prior to such reduction, or Executive’s
removal from such function, duties or responsibilities, unless Executive is
provided with a comparable function, duties and responsibilities; provided,
however, that a reduction in duties, position or responsibilities solely by
virtue of the Company being acquired and made part of a larger entity shall not
constitute “Good Reason”;



                    (ii) Executive’s Base Salary is materially reduced by the Company, unless
such reduction is pursuant to a salary reduction program as described in
Section 2.1 hereof or there is a material reduction in the benefits that are in
effect for the Executive immediately prior to such reduction, unless such
reduction is pursuant to a uniform reduction in benefits for all Senior
Executives;



                    (iii) The failure by the Company to obtain the assumption by operation of
law or otherwise of this Agreement by any entity which is the surviving entity
in any merger or other form of corporate reorganization involving the Company
or by any entity which acquires all or substantially all of the Company’s
assets; or



                    (iv) A failure by the Company to timely pay Executive’s Base Salary.



               (j) “Non-Competition Period” — as defined in Section 5.1(d).



               (k) “Notice of Termination” shall mean a notice which shall indicate the
specific termination provision of this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive’s employment under the provision so
indicated. Each Notice of Termination shall be delivered at least 30 days
prior to the effective date of termination.



               (l) “Propriety Information” — as defined in Section 5.1(c).



               (m) “Retirement” shall mean normal retirement at age 65 or in accordance
with rules generally applicable to the Company’s executive employees in
accordance with any other retirement arrangement established with Executive’s
consent with respect to Executive.



               (n) “Senior Executives” shall mean the five highest compensated employees
of the Company determined in accordance with applicable rules and regulations
of the Securities and Exchange Commission.



               (o) “Total Disability” shall mean Executive’s failure substantially to
perform his duties hereunder on a full-time basis for a period exceeding 180
consecutive days or for periods aggregating more than 180 days during any
twelve-month period as a result of incapacity due to physical or mental
illness. If there is a dispute as to whether Executive is or was physically or
mentally unable to perform his duties under this Agreement, such dispute shall
be submitted for a resolution to a licensed physician agreed upon by the
Company and Executive, or if an agreement cannot be promptly reached, the
Company and Executive will each select a



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physician, and if these physicians cannot agree, they will pick a third
physician whose decision shall be binding on all parties. If such a dispute
arises, Executive shall submit to such examinations and shall provide such
information as such physician(s) may request, and the determination of the
physician(s) as to Executive’s physical or mental condition shall be binding
and conclusive.



     6.2 Mitigation of Damages; Dispute Resolution.



          (a) The Company’s obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to Executive under any
of the provisions of this Agreement and such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to
pay promptly as incurred, to the full extent permitted by law, all legal fees
and expense which the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee or performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Code Section 1274(d) or any successor provision
thereto, for an obligation with a term equal to the length of such delay.



          (b) If there shall be any dispute between the Company and Executive (i) in
the event of any termination of Executive’s employment by the Company, whether
such termination was for Cause, or (ii) in the event of any termination of
employment of Executive, whether Good Reason existed, the dispute shall be
resolved in accordance with the dispute resolution procedures set forth in
Exhibit “A” hereto, and until there is a resolution and award declaring that
such termination was for Cause or that the termination by Executive for Good
Reason was not made in good faith, the Company shall pay all amounts, and
provide all benefits, to Executive and/or Executive’s family or other
beneficiaries, as the case may be, that the Company would be required to pay or
provide hereunder as though such termination were by the Company without Cause
or by Executive with Good Reason provided, however, that the Company shall not
be required to pay any disputed amounts pursuant to this subparagraph (b)
except upon receipt of an undertaking by or on behalf of Executive to repay,
without interest or penalty, all such amounts to which Executive is ultimately
adjudged not be entitled as soon as possible after completion of the dispute
resolution with respect to the payment of such disputed amount.



     6.3 Successors; Binding Agreement. This Agreement shall be binding upon
any successor to the Company and shall inure to the benefit of and be
enforceable by Executive’s personal or legal representatives, beneficiaries,
designees, executors, administrators, heirs, distributees, devisees and
legatees.



     6.4 Modification; No Waiver. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto. No
term or condition of this Agreement shall be deemed to have been waived, nor
shall there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument by the party



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charged with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein, and each such
waiver shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future or as to any
other term or condition.



     6.5 Severability. The covenants and agreements contained herein are
separate and severable and the invalidity or unenforceability of any one or
more of such covenants or agreements, if not material to the employment
arrangement that is the basis for this Agreement, shall not affect the validity
or enforceability of any other covenant or agreement contained herein. If, in
any judicial proceedings, a court shall refuse to enforce one or more of the
covenants or agreements contained herein because the duration thereof is too
long, or the scope thereof is too broad, it is expressly agreed between the
parties hereto that such duration or scope shall be deemed reduced to the
extent necessary to permit the enforcement of such covenants or agreements.



     6.6 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, to the parties hereto
at the following addresses:



If to the Company, to it at:



Teknik Digital Arts, inc.

3104 E. Camelback Road #509

Phoenix AZ 85016

ATTN: John Ward



with a copy to:



Gregory R. Hall, Esq.

Squire, Sanders & Dempsey L.L.P.

40 North Central Avenue

Suite 2700

Phoenix, Arizona 85004



If Executive, to him at



Corey Comstock

17 Marigold

Irvine CA 92614



     6.7 Assignment. This Agreement and any rights hereunder shall not be
assignable to either party without the prior written consent of the other
party.



     6.8 Entire Understanding; Termination of Prior Agreements. This Agreement
constitutes the entire understanding between the parties hereto and no
agreement, representation, warranty or covenant has been made by either party
except as expressly set forth herein. All



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prior agreements relating to the subject matter hereof are hereby
superseded in their entirety and shall be of no further force or effect.



     6.9 Executive’s Representations. Executive represents and warrants that
neither the execution and delivery of this Agreement nor the performance of his
duties hereunder violates the provisions of any other agreement to which he is
a party or by which he is bound.



     6.10 Survivorship. Unless specifically stated to the contrary in this
Agreement, the rights and obligations of the Executive and Company set forth
herein shall continue beyond the term of this Agreement, including, but not by
way of limitation, the Company’s obligations under Sections 2.4, 4.3, and the
Company’s rights under Article V.



     6.11 Governing Law. This Agreement shall be construed in accordance with
and governed for all purposes by the laws of the State of California applicable
to contracts executed and wholly performed within such state.



	 	 	 
	

	 	IN WITNESS WHEREOF, the parties hereto have
duly executed this Agreement as of the day
and year first above written.
	 
	 	 
	

	 	TEKNIK DIGITAL ARTS, INC. A Nevada
corporation
	 
	 	 
	

	 	By:                                                                             
	 
	 	 
	

	 	Name:                                                                             
	 
	 	 
	

	 	Title:                                                                             
	 
	 	 
	

	 	EXECUTIVE
	 
	 	 
	

	 	                                                                            
	

	 	Corey Comstock







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Exhibit “A”




Dispute Resolution




The parties hereby agree to refer any and all disputes arising under or related
to this Agreement and/or the transactions contemplated under this Agreement to
the American Arbitration Association in Irvine, California. The parties
further agree that the dispute shall be referred to a panel of three
arbitrators in accordance with the Commercial Arbitration Rules (the
“Arbitration Rules”) of the American Arbitration Association, in effect on the
date that a demand for arbitration is made. The three arbitrators shall be
appointed as follows: Each party may select one arbitrator and thereafter these
two shall select the third and final arbitrator. If the two selected
arbitrators cannot agree upon the third arbitrator within five (5) days of
their selection, then the third and final arbitrator shall be selected by and
according to the Arbitration Rules. Once appointed, the arbitrators shall
appoint a time and place for a pre-hearing status conference not more than
fourteen (14) days from the date of their appointment, and shall appoint a time
and place for a final hearing not more than forty-five days from the date of
the status conference. The final hearing shall be concluded no later than
thirty (30) days after its commencement. The party that demands arbitration
shall specify in writing the matter or issue to be submitted to arbitration.
The arbitrators shall render a single written decision setting forth an award
and stating with reasonable detail the reasons for the decision or award
reached. Any cash component of the award shall be payable in United States
dollars through a bank in the United States. Each party shall bear its own
costs of preparing for and presenting its case to the arbitration panel, and
the cost of the arbitration, including the fees and expenses of the arbitrators
shall be equally shared by the parties.




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